TSX-V: HME
VANCOUVER, May 25, 2017 /CNW/ - Hemisphere Energy
Corporation (TSX-V: HME) ("Hemisphere" or the "Company") announces
its financial and operating results for the three months ended
March 31, 2017.
Q1 2017 Highlights
- Achieved quarterly production average of 583 boe/d (91% oil), a
15% increase over the first quarter of 2016.
- Increased revenue by 145% to $2.3
million compared to the first quarter of 2016.
- Increased operating netbacks, which includes gains on commodity
contracts, to $18.26/boe, an increase
of 570% from the first quarter of 2016.
- Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) (excluding unrealized gain/loss on financial
instruments) were $652,000.
- Increased funds flow from operations to $505,331, for an increase of 85% over the fourth
quarter of 2016.
- Corporate Liability Management Ratio (LMR) with the Alberta
Energy Regulator was 4.59 at the end of the first quarter
2017.
- Renewed $12.5 million credit
facility with no changes to covenants and applicable margins on
borrowing costs.
Corporate Update
During the first quarter of 2017, Hemisphere continued to be
conservative in its capital spending while focusing on preparation
of development plans in its core producing properties. With all
four waterflood pilot projects successfully underway in Atlee
Buffalo, the Company raised $1.1
million of development flow-through equity in April 2017 in order to drill up to two wells in
the third quarter to expand production and reserves in the Upper
Mannville G pool. Available cashflow will be used for installation
of additional facilities at the G pool, which is currently
producing at a rate limited by pump and tank sizes.
With the completion of a turnaround in Jenner in early May and the recent addition of
a pipeline in Atlee Buffalo to help reinject more water, corporate
production has reached approximately 650 boe/d (93% oil), based on
field estimates, in the last week. A number of optimization
candidates have also been identified to increase pump sizes in the
near future.
The Company's annual review for its demand operating credit
facility has been completed and the borrowing base has been
reaffirmed at $12.5 million. The
facility is secured by a general security agreement and a floating
charge on all lands of the Company and bears an interest at the
bank's prime rate plus 2.5%, as well as a standby charge for any
undrawn funds. Current corporate net debt is estimated at
$10.2 million with approximately
$9.9 million drawn on the credit
facility.
Hemisphere's corporate strategy is to continue to achieve
organic production and reserve growth while preserving financial
flexibility. With continued success of its waterfloods and planned
capital expenditures the Company expects to see growth in
production and reserves through the year. Economics in the Atlee
Buffalo waterflood play are strong at current strip pricing and
management believes the Company has considerable growth upside
through development of these exceptional assets.
Financial and Operating Summary
|
Three Months Ended
March 31
|
Financial
|
2017
|
2016
|
Petroleum and natural
gas revenue
|
$
|
2,292,746
|
$
|
935,834
|
Operating
netback(1)
|
|
958,276
|
|
126,056
|
Funds flow from
operations(2)
|
|
505,330
|
|
(247,514)
|
|
Per share, basic and
diluted
|
|
0.01
|
|
(0.00)
|
Net income
(loss)
|
|
(138,678)
|
|
(1,066,556)
|
|
Per share, basic and
diluted
|
|
(0.00)
|
|
(0.01)
|
Capital expenditures,
including property acquisitions
|
|
256,513
|
|
344,676
|
Net
debt(3)
|
|
11,578,352
|
|
12,038,298
|
Bank
indebtedness
|
$
|
11,622,930
|
$
|
11,533,660
|
Operating
|
|
|
Average daily
production
|
|
|
|
|
|
Oil
(bbl/d)
|
|
530
|
|
409
|
|
Natural gas
(Mcf/d)
|
|
309
|
|
581
|
|
NGL
(bbl/d)
|
|
2
|
|
2
|
|
Combined
(boe/d)
|
|
583
|
|
508
|
|
Oil and NGL
weighting
|
|
91%
|
|
81%
|
Average sales
prices
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
46.29
|
$
|
22.39
|
|
Natural gas
($/Mcf)
|
|
2.80
|
|
1.86
|
|
NGL
($/bbl)
|
|
46.97
|
|
19.21
|
|
Combined
($/boe)
|
$
|
43.68
|
$
|
20.24
|
Operating netback
($/boe)
|
|
|
|
|
|
Petroleum and natural
gas revenue
|
$
|
43.68
|
$
|
20.24
|
|
Royalties
|
|
5.70
|
|
2.36
|
|
Operating
costs
|
|
17.41
|
|
11.45
|
|
Transportation
costs
|
|
3.07
|
|
3.70
|
|
Operating field
netback(4)
|
$
|
17.51
|
$
|
2.73
|
|
Realized commodity
hedging gain
(loss)
|
|
0.75
|
|
-
|
|
Operating
Netback(1)
|
$
|
18.26
|
$
|
2.73
|
Notes:
|
(1)
|
Operating netback
is a non-IFRS measure calculated as the operating field netback
plus the Company's realized commodity hedging gain
(loss).
|
(2)
|
Funds flow from
operations is an additional IFRS measure that represents cash
generated by operating activities, before changes in non-cash
working capital and may not be comparable to measures used by other
companies.
|
(3)
|
Net debt is a
non-IFRS measure calculated as current assets minus current
liabilities including bank indebtedness and excluding fair value of
financial instruments and any flow-through share
premium.
|
(4)
|
Operating field
netback per boe is a non-IFRS measure calculated as the Company's
oil and gas sales, less royalties, operating expenses and
transportation costs per barrel of oil equivalent.
|
Annual General and Special Meeting of Shareholders
Hemisphere's Annual General and Special Meeting of Shareholders
is being held in the Pender Room of Oceanic Plaza, 1035 West Pender
Street, Vancouver, British
Columbia on Wednesday, June 14,
2017 at 9:30 a.m. (Pacific Daylight
Time).
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a producing oil and gas company
focused on developing conventional oil assets with low risk
drilling opportunities. Hemisphere plans continual growth in
production, reserves, and cash flow by drilling existing projects
and executing strategic acquisitions. Hemisphere trades on
the TSX Venture Exchange as a Tier 1 issuer under the symbol
"HME".
Forward-looking Statements
This news release contains "forward-looking statements" that
are based on Hemisphere's current expectations, estimates,
forecasts and projections. The words "estimates", "projects",
"expects", "intends", "believes", "plans", or their negatives or
other comparable words and phrases are intended to identify
forward-looking statements and include statements regarding
Hemisphere's outlook for our future operations, plans, and timing
for the commencement or advancement of exploration and development
activities on our properties; Hemisphere's plans to drill up to two
wells into the Atlee Buffalo Upper Mannville G pool in the third
quarter; Hemisphere's use of available cashflow to be used for
installation of additional facilities at the G pool; the Company's
plans to increase pump sizes in the near future; Hemisphere's
corporate strategy of achieving organic production and reserve
growth while preserving financial flexibility; the Company's
expectations for growth in production and reserves through the year
with the continued success of its waterfloods and planned capital
expenditures; Management's belief that the Company has considerable
growth upside through development of their assets, and other
expectations, intentions, and plans that are not historical
fact.
Forward‐looking statements are based on a number of material
factors, expectations, or assumptions of Hemisphere which have been
used to develop such statements and information but which may prove
to be incorrect. Although Hemisphere believes that the expectations
reflected in such forward‐looking statements or information are
reasonable, undue reliance should not be placed on forward‐looking
statements because Hemisphere can give no assurance that such
expectations will prove to be correct. In addition to other factors
and assumptions which may be identified herein, assumptions have
been made regarding, among other things: that Hemisphere will
continue to conduct its operations in a manner consistent with past
operations; results from drilling and development activities are
consistent with past operations; the quality of the reservoirs in
which Hemisphere operates and continued performance from existing
wells; the continued and timely development of infrastructure in
areas of new production; the accuracy of the estimates of
Hemisphere's reserve volumes; certain commodity price and other
cost assumptions; continued availability of debt and equity
financing and cash flow to fund Hemisphere's current and future
plans and expenditures; the impact of increasing competition; the
general stability of the economic and political environment in
which Hemisphere operates; the general continuance of current
industry conditions; the timely receipt of any required regulatory
approvals; the ability of Hemisphere to obtain qualified staff,
equipment and services in a timely and cost efficient manner;
drilling results; the ability of the operator of the projects in
which Hemisphere has an interest in to operate the field in a safe,
efficient and effective manner; the ability of Hemisphere to obtain
financing on acceptable terms; field production rates and decline
rates; the ability to replace and expand oil and natural gas
reserves through acquisition, development and exploration; the
timing and cost of pipeline, storage and facility construction and
expansion and the ability of Hemisphere to secure adequate product
transportation; future commodity prices; currency, exchange and
interest rates; regulatory framework regarding royalties, taxes and
environmental matters in the jurisdictions in which Hemisphere
operates; and the ability of Hemisphere to successfully market its
oil and natural gas products.
The forward‐looking information and statements included in
this news release are not guarantees of future performance and
should not be unduly relied upon. Such information and statements,
including the assumptions made in respect thereof, involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to defer materially from those anticipated
in such forward‐looking information or statements including,
without limitation: changes in commodity prices; changes in the
demand for or supply of Hemisphere's products, the early stage of
development of some of the evaluated areas and zones; unanticipated
operating results or production declines; changes in tax or
environmental laws, royalty rates or other regulatory matters;
changes in development plans of Hemisphere or by third party
operators of Hemisphere's properties, increased debt levels or debt
service requirements; inaccurate estimation of Hemisphere's oil and
gas reserve volumes; limited, unfavourable or a lack of access to
capital
markets; increased costs; a lack of adequate insurance
coverage; the impact of competitors; and certain other risks
detailed from time‐to‐time in Hemisphere's public disclosure
documents, (including, without limitation, those risks identified
in this news release and in Hemisphere's Annual Information
Form).
The forward‐looking information and statements contained in
this news release speak only as of the date of this news release,
and Hemisphere does not assume any obligation to publicly update or
revise any of the included forward‐looking statements or
information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws.
Non-IFRS and Additional IFRS Measures
The press release contains terms commonly used in the oil and
gas industry which are not defined by or calculated in accordance
with International Financial Reporting Standards ("IFRS"), such as:
(i) funds flow from operations, which is an additional IFRS
measure; (ii) net debt, which is a non-IFRS measure; and (iii)
operating netback, operating netback per boe and operating field
netback per boe, which are a non-IFRS measures. These terms should
not be considered an alternative to, or more meaningful than the
comparable IFRS measures (as determined in accordance with IFRS)
which in the case of funds flow from operations, operating field
netback and operating netback, are cash provided by operating
activities and cash flow from operating activities or net income or
net loss, respectively. There is no IFRS measure that is
reasonably comparable to net debt. These measures are
commonly used in the oil and gas industry and by Hemisphere to
provide shareholders and potential investors with additional
information regarding: (i) in the case of funds flow from
operations, the Company's ability to generate the funds necessary
to support future growth through capital investment and to repay
any debt; (ii) in the case of operating netback, operating netback
per boe and operating field netback per boe the indication of the
Company's profitability relative to current commodity prices; and
(iii) in the case of net debt, the capital structure of the
Company.
Hemisphere's determination of these measures may not be
comparable to that reported by other companies. Funds flow from
operations is calculated as cash generated by operating activities,
before changes in non-cash working capital; operating field netback
is calculated as the Company's oil and gas sales, less royalties,
operating expenses, and transportation costs; operating field
netback per boe is calculated as operating field netback divided by
production for the applicable period on a per barrel of oil
equivalent basis; operating netback and operating netback per boe
adjusts operating field netback and operating field netback per
boe, respectively, for any realized gains or losses on commodity
hedges and net debt is calculated as current assets minus current
liabilities including bank indebtedness and excluding fair value of
financial instruments and any flow-through share premium. The
Company has provided additional information on how these measures
are calculated in the Management's Discussion and Analysis for the
year ended December 31, 2016, which
is available under the Company's SEDAR profile at
www.sedar.com.
Oil and Gas Advisories
A barrel of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion ratio of 6
Mcf:1 Bbl is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. In addition, given that
the value ratio based on the current price of crude oil as compared
to natural gas is significantly different from the energy
equivalency of 6:1, utilizing a conversion on a 6:1 basis may be
misleading as an indication of value.
Definitions and Abbreviations
bbl
|
barrel
|
Mcf
|
thousand cubic
feet
|
bbl/d
|
barrels per
day
|
Mcf/d
|
thousand cubic
feet per day
|
$/bbl
|
dollar per
barrel
|
$/Mcf
|
dollar per
thousand cubic feet
|
boe
|
barrel of oil
equivalent
|
NGL
|
natural gas
liquids
|
boe/d
|
barrel of oil
equivalent per day
|
IFRS
|
International
Financial Reporting Standards
|
$/boe
|
dollar per barrel
of oil equivalent
|
|
|
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this news release.
SOURCE Hemisphere Energy Corporation